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                                                                   EXHIBIT 10.26


                              EMPLOYMENT AGREEMENT

         This is an agreement (the "Agreement") between Ground Round
Restaurants, Inc. (the "Company" or "Ground Round") a New York corporation with
its principal place of business at 35 Braintree Hill Office Park, Braintree,
Massachusetts and Stephen J. Kiel (the "Employee"), with a business address of
35 Braintree Hill Office Park, Braintree, Massachusetts, effective as of
September 1, 1996 (the "Effective Date").

         In consideration of the promises and mutual covenants contained herein,
the parties agree as follows:

1.       Employment.
         ----------

         From and after the Effective Date, for and during the term, and subject
         to the further conditions of this Agreement, Employee shall be employed
         in the capacity of Senior Vice President, Chief Financial Officer and
         Treasurer of Company and its affiliates and subsidiaries and perform
         all duties that may reasonably be required of him as Senior Vice
         President, Chief Financial Officer and Treasurer or as may be assigned
         by the Chairman, President and Chief Executive Officer (the "Chairman")
         and/or the Board of Directors (the "Board") of the Company. Employee
         shall report to the Chairman and shall be subject to his discretion and
         control.

         The location for such employment shall be at the corporate offices of
         the Company.

         Employee shall devote substantially all of his business time and his
         best efforts, business judgment, skill and knowledge exclusively to the
         advancement of the business and interests of the Company and to the
         ethical discharge of his duties and responsibilities under this
         Agreement. Employee shall not engage in any other business activity or
         serve in any industry, trade, professional, governmental or academic
         position during the term of employment, except for the following:
         managing the personal business affairs of Employee; and as may
         otherwise be expressly approved in writing in advance by the Chairman.



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2.       Term.
         ----

         Company shall employ Employee for an initial term commencing on the
         Effective Date and ending September 30, 1997 unless Employee's
         employment is sooner terminated pursuant to the provisions of this
         Agreement. The initial term shall be automatically extended for
         successive one year terms, not to go beyond September 30, 1999, unless
         at least 90 days prior to the expiration of the original or extended
         term either party shall advise the other in writing that it wishes to
         terminate this Agreement as of the end of the original or that extended
         term (the original and any extended term shall hereinafter be
         collectively referred to as the "Employment Period").

3.       Compensation and Benefits.
         -------------------------

         (a)      Base Salary.
                  -----------

                  During the Employment Period, the Company shall pay the
                  Employee base salary (the "Base Salary") at a rate of no less
                  than Fourteen Thousand Five Hundred and Eighty- Three Dollars
                  and Thirty-Three Cents ($14,583.33) per month (the "Base
                  Rate"), prorated for any partial period. On or about October
                  of each fiscal year of the Company, the Employee and the
                  Company shall commence good faith negotiations regarding an
                  adjustment to the Employee's Base Salary; provided, that
                  during the Employment Period, the Company shall not pay the
                  Employee a Base Salary that is less than the Base Rate. Base
                  Salary shall be payable in accordance with the payroll
                  practices of the Company for its executive.

         (b)      Bonus.
                  -----

                  Employee shall be eligible to receive during the term of this
                  Agreement commencing in the Company's 1996 fiscal year, and
                  shall be paid within thirty (30) days of the annual audit of
                  the Company, if the calculations mandate such payment, a bonus
                  as provided in the Corporate Office Incentive Plan, and
                  subject to its terms and conditions. For fiscal 1996, Employee
                  is eligible to receive a pro rata share of any bonus earned to
                  reflect the number of days worked by Employee in such year.

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                  For fiscal 1997 only, if the applicable Corporate Incentive
                  Plan does not compensate Employee with at least Seventy-Five
                  Thousand Dollars ($75,000) (the "1997 guaranteed minimum
                  bonus"), the Company agrees to pay the Employee an additional
                  amount so that the total bonus received by the Employee is not
                  less than the 1997 guaranteed minimum bonus. In order to
                  receive a bonus that is greater than the 1997 guaranteed
                  minimum bonus, Employee must be employed on the date the 1997
                  bonus checks are distributed. Company and Employee agree that
                  the 1997 Corporate Office Incentive Plan and any future bonus
                  plans may be different than the 1996 Corporate Office
                  Incentive Plan.

         (c)      Stock Options.
                  -------------

                  The Company shall grant to Employee, on the Effective Date, a
                  stock option to purchase Fifty Thousand (50,000) shares of
                  common stock of the Company in accordance with the terms of
                  the Company's Amended and Restated 1989 Stock Option Plan and
                  the 1992 Equity Incentive Plan. The price at which shares of
                  Common Stock may be purchased pursuant to the option shall be
                  the closing price, as of August 30, 1996, of a share of the
                  Company's common stock as listed on NASDAQ. The option shall
                  become exercisable in equal installments over a three-year
                  period, with the first installment being exercisable on August
                  29, 1997.

                  Promptly after the grant of the Option, the Company and
                  Employee shall execute and deliver to each other a Stock
                  Option Agreement evidencing the Option and the terms thereof
                  (the "Stock Option Agreement"). It is understood and agreed
                  that the Option shall be granted and governed in accordance
                  with the terms of the Plans and the rules and regulations of
                  the Securities and Exchange Commission.

         (d)      Benefits.
                  --------

                  Except as otherwise provided herein, Employee shall be
                  entitled to receive the fringe benefits normally provided by
                  the Company to senior executives and in accordance with the
                  terms of each Plan or document which controls

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                  such benefit (including but not limited to life insurance
                  coverage, medical and dental insurance, travel and accident
                  insurance, Long-Term Disability coverage, Executive Health
                  examination on an annual basis, participation in Company's
                  non-qualified Deferred Compensation Plan, stock options and
                  other benefits during the term of this Agreement). Employee
                  shall be entitled to the use of a company automobile in
                  accordance with the Company's Automobile Policy, and which the
                  Company shall insure and maintain, or to a car allowance which
                  the Company shall insure the automobile in accordance with
                  Company policy. The Employee's participation shall be subject
                  to the terms of the applicable plan documents, generally
                  applicable company policies and appropriate discretion of the
                  Board or any administrative committee contemplated by such
                  plans.

         (e)      Vacation.
                  --------

                  During the Employment Period, Employee shall be entitled to
                  vacation (prorated for partial calendar years), subject to the
                  reasonable business needs of the Company and in accordance
                  with the terms of the Company's Vacation Policy.

         (f)      Relocation.
                  ----------

                  If Employee relocates to the Commonwealth of Massachusetts,
                  the Company agrees to reimburse Employee for reasonable and
                  ordinary expenses which are covered under the Company's
                  Employee Relocation Policy and in accordance with the terms of
                  the Policy.

         (g)      Living Expenses.
                  ---------------

                  The Company shall provide reasonable temporary living and
                  subsistence expenses in the Boston area and will provide
                  airfare, on a weekly basis for visits to the Cleveland, Ohio
                  area and the in-house Company travel agent shall make all
                  travel arrangements. Employee and Company agree to review
                  these living and travel provisions on a periodic basis, but no
                  later than September 1, 1997.

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         (h)      Certain Expenses.
                  ----------------

                  The Company shall pay or reimburse the Employee for all
                  reasonable, customary business expenses incurred or paid by
                  the Employee in the performance of the duties and
                  responsibilities of his position and to such reasonable
                  substantiation and documentation as may be required by the
                  Company.

4.       Termination of Employment.
         -------------------------

         (a)      Death.
                  -----

                  If the Employee dies during the Employment Period, the Company
                  shall have no further obligations under this Agreement other
                  than to pay to the Employee's estate Base Salary through the
                  end of the calendar month of his death and any other bonus or
                  compensation hereunder in accordance with the applicable
                  Company plan or policy, including a prorata share of the 1997
                  guaranteed minimum bonus to reflect the number of days worked
                  by Employee in the 1997 fiscal year.

         (b)      Disability.
                  ----------

                  The Company may terminate the Employee's employment by written
                  notice in the event that, for any reason, he becomes disabled,
                  either physically or psychologically, or is unable to perform
                  substantially all of his essential duties and responsibilities
                  under this Agreement for One Hundred Eighty (180) days during
                  any period of three hundred and sixty-five (365) consecutive
                  days. In the event of such a termination, the Company shall
                  have no further obligations under this Agreement other than to
                  pay to the Employee Base Salary through the end of the
                  calendar month of his termination and any other bonus or
                  compensation hereunder in accordance with the applicable
                  Company plan or policy, including a prorata share of the 1997
                  guaranteed minimum bonus to reflect the number of days worked
                  by Employee in the 1997 fiscal year.

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                  The Employee shall at the request of the Company, submit to a
                  medical examination by a physician selected by the Company, to
                  whom the Employee or his duly appointed guardian has no
                  reasonable objection, to determine whether the Employee is
                  disabled. Such determination shall be conclusive. If the
                  Employee fails to submit to such medical examination, the
                  Company's determination of the Employee's disability shall be
                  conclusive.

                  Paragraph 4(b) shall be interpreted and applied in accordance
                  with the Americans with Disabilities Act, including but not
                  limited to, the obligation to provide reasonable
                  accommodations as specified under such Act.

         (c)      Termination by the Company for Cause.
                  ------------------------------------

                  The Company may terminate the Employee's employment hereunder
                  for Cause at any time upon written notice setting forth in
                  reasonable detail the nature of the Cause. The following, as
                  determined by the Chairman in his reasonable judgment, will
                  constitute Cause:

                  (i)      The Employee's failure to perform his duties and 
                           responsibilities to the Company; a breach of
                           fiduciary duty; any willful misconduct by the
                           Employee which injures the Company (monetarily or
                           otherwise) or the Employee's gross negligence in the
                           performance of his duties and responsibilities; or

                  (ii)     fraud, embezzlement or other dishonesty by the 
                           Employee with respect to the Company; or

                  (iii)    the Employee's conviction of, or plea of nolo
                           contendere to, a felony or other crime involving
                           moral turpitude;

                  (iv)     any material breach of this Agreement; and

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                  (v)      any form of misconduct as described in the Company's
                           current Termination Policy under I.B. 4 of such
                           policy.

                  Upon termination of the Employee's employment for Cause, the
                  Company shall have no further obligations under this Agreement
                  other than to pay to the Employee any Base Salary through the
                  date of termination, and any other amounts that have been
                  earned in accordance with the applicable Company policy, but
                  has not been paid, but specifically excluding any bonus
                  payment stated in paragraph 3(b).

         (d)      Termination by the Company Other Than for Cause
                  -----------------------------------------------

                  The Company may terminate the Employee's employment hereunder,
                  other than for Cause, at any time upon written notice, as
                  defined in the Company's current Termination Policy. In the
                  event of such termination, the Company shall do the following:

                  (i)      Pay to Employee his Base Salary through the date of
                           termination, plus a prorata share of the 1997
                           guaranteed minimum bonus based on the number of days
                           worked by Employee in the 1997 fiscal year.

                  (ii)     Pay to the Employee severance equal to the greater of
                           (i) six (6) months of Employee's monthly Base Salary
                           or (ii) the amount of Base Salary the Employee would
                           have received between the date of termination and
                           September 30, 1997. Said severance shall be
                           considered as severance under the Company's Severance
                           Pay Plan and paid to Employee in accordance with such
                           Plan.

                  (iii)    Pay to Employee any other bonus or compensation
                           hereunder in accordance with the applicable Company
                           plan or policy.

                  The Company shall have no other obligations under this
                  Agreement.

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         (e)      Termination by the Executive.
                  ----------------------------

                  (i)      If the Employee terminates his employment during the
                           Employment Period because the Employee resigns, the
                           Company shall pay Employee the Base Salary through
                           the date of termination and any other bonus or
                           compensation in accordance with the applicable
                           Company plan or policy.

                  (ii)     If the Employee terminates his employment with the 
                           Company for any other reason, in addition to its
                           other rights and remedies, the Company shall have no
                           further obligations under this Agreement other than
                           to pay to the Employee any Base Salary through the
                           date of termination and any other bonus or
                           compensation in accordance with the applicable
                           Company plan or policy.

         (f)      Stock Options.
                  -------------

                  Upon termination, death or disability, as such terms are
                  defined in paragraph 4, the Employee's rights with respect to
                  any stock options then held shall be governed by the Plan(s)
                  and/or any applicable documents under which such options were
                  awarded.

         (g)      Severance.
                  ---------

                  Upon termination, death or disability, Employee shall be
                  entitled to receive any applicable severance payments under
                  the Company's Severance Pay Plan, subject to the terms and
                  conditions of such Plan.

         (h)      Deferred Compensation.
                  ---------------------

                  Upon termination, death or disability, the Company will
                  distribute the entire amount credited to Employee's account
                  under the Company's non-qualified Deferred Compensation Plan,
                  subject to the terms and conditions of such Plan.

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5.       D & O Liability Insurance.
         -------------------------

         The Employee shall be covered in his capacity as an officer of the
         Company under the Company's directors and officers liability insurance
         policy. The cost of such coverage shall be borne by the Company.

6.       Nondisclosure.
         -------------

         During the Employment Period, the Employee may become aware of
         information which is nonpublic, confidential or proprietary in nature
         with respect to the Company or with respect to other companies,
         persons, entities, ventures or business opportunities in which the
         Company has, or, if it were disclosed to the Company, the Company might
         have, an interest ("Confidential Information"). During the Employment
         Period and thereafter, all Confidential Information will be kept
         strictly confidential by the Employee and the Employee shall not: (a)
         copy, reproduce, distribute or disclose any Confidential Information to
         any third party except in the course of his employment by the Company;
         (b) use any Confidential Information for any purpose other than in
         connection with his employment by the Company; or (c) use any
         Confidential Information in any way that is detrimental to the Company.

         Confidential Information shall not include information which the
         Employee can demonstrate: (a) is or becomes generally available to the
         public other than by breach by the Employee of his agreement herein;
         (b) is required to be disclosed by the Employee after due notice to the
         Company, pursuant to obligations under law, regulation or court order;
         or (c) was prior to the Effective Date, or thereafter becomes, known to
         the Employee on a nonconfidential basis.

         Upon termination of the Employee's employment, he shall immediately
         return at Company's expense or destroy on request of Company's Counsel
         all Confidential Information, including all notes, copies,
         reproductions, summaries, analyses, or extracts thereof, then in his
         possession. Such return or destruction shall not abrogate the
         continuing obligations of the Employee under this Agreement.

         In the event that the Employee is requested or required (by
         interrogatories, request for information or documents, subpoena, civil
         investigative demand or similar process) to disclose any Confidential
         Information, he shall provide the Company with prompt written notice

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         so that it may seek a protective order or other appropriate remedy. In
         the event such protection or other remedy is not obtained, the Employee
         shall furnish only that portion of the Confidential Information which
         he is advised by counsel agreed to by Company and Employee, at
         Company's expense, is legally required and shall exercise best efforts
         to obtain assurance that confidential treatment will be accorded to
         such Confidential Information, but in no event shall Employee be
         required to withhold such Confidential Information if incarceration of
         Employee may result.

         The Employee agrees that until the expiration of two (2) years from the
         date of termination of his employment by the Company, regardless of the
         reason for termination, he will not without the prior written approval
         of the Company (i) in any manner acquire, agree to acquire or make any
         proposal to acquire, directly or indirectly, any securities, assets or
         property of the Company or any of its subsidiaries, whether such
         agreement or proposal is with the Employee or with a third party, other
         than shares of common stock he is entitled to acquire under the terms
         of this Agreement or the Stock Option Plan or Equity Incentive Plan, or
         by inheritance, (ii) propose to enter into, directly or indirectly, any
         merger or other business combination involving the Company or any of
         its subsidiaries, (iii) make, or in any way participate, directly or
         indirectly, in any "solicitation" or "proxies" (as such terms are used
         in the proxy rules of the Securities and Exchange Commission) to vote,
         or seek to advise or influence any person with respect to the voting
         of, any voting securities of the Company or any of its subsidiaries,
         (iv) form, join or in any way participate in a "group" (within the
         meaning of Section 13(d)(3) of the Securities Exchange Act of 1934)
         with respect to any voting securities of the Company or any of its
         subsidiaries, (v) otherwise act, alone or in concert with others, to
         seek to control or influence the management, Board of Directors or
         policies of the Company, (vi) disclose any intention, plan or
         arrangement inconsistent with the foregoing or (vii) advise, encourage,
         provide assistance (including financial assistance) to or hold
         discussions with any other persons in connection with any of the
         foregoing. Employee may vote any stock owned by Employee, either
         directly or indirectly, in any manner Employee chooses, as long as such
         voting right does not violate any securities laws.

         The Employee hereby acknowledges that he is aware that the securities
         laws prohibit any person who has material, nonpublic information
         concerning the Company from purchasing or selling securities of the
         Company or from communicating such information to

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         any other person under circumstances in which it is reasonably
         foreseeable that such person is likely to purchase or sell securities.

         The obligations of the Employee stated in this paragraph shall, except
         where expressly limited as to time, continue without limit as to time
         and without regard to the employment status of the Employee.

7.       Payments.
         --------

         The Company shall have the right to cause all payments pursuant to this
         Agreement to be made by The Ground Round, Inc. ("TGRI") and to cause
         TGRI to provide all benefits required hereunder, which benefits shall
         be those normally provided by TGRI to senior executives of TGRI or the
         Company.

8.       Withholding.
         -----------

         All payments made by the Company under this Agreement shall be reduced
         by any tax or other amounts required to withheld by the Company under
         applicable law.

9.       Assignment.
         ----------

         Except as provided in this paragraph, neither the Company nor the
         Employee may make any assignment of this Agreement or any interest
         herein, by operation of law or otherwise, without the prior written
         consent of the other. The Company may without the consent of the
         Employee assign its rights and obligations under this Agreement to any
         wholly-owned subsidiary of the Company or to any corporation or other
         business entity into which the Company has merged or with which it has
         consolidated or which has acquired substantially all of the Company's
         assets, provided that no such assignment shall relieve the Company of
         its obligations under this Agreement. This Agreement shall inure to the
         benefit of and be binding upon the Company and the Employee, their
         respective successors, executors, administrators, heirs and permitted
         assigns.

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10.      Conflicting Agreement.
         ---------------------

         The Employee hereby represents and warrants that the execution of this
         Agreement and the performance of the obligations hereunder will not
         breach or be in conflict with any other agreement to which Employee is
         a party or is bound and that Employee is not now subject to any
         covenants against competition or similar covenants that would affect
         the performance of Employee's obligations hereunder.

11.      Entire Agreement.
         ----------------

         This Agreement constitutes the entire agreement between the parties and
         supersedes all prior communications, agreements, representations and
         understandings, written or oral, express or implied, with respect to
         the terms and conditions of the Employee's employment.

12.      Amendment.
         ---------

         This Agreement may be amended or modified only by a written instrument
         signed by the Employee and by such officer as may be specifically
         designated and authorized by the Board.

13.      Governing Law.
         -------------

         This is a Massachusetts contract and shall be construed and enforced
         under and be governed in all respects by the law of the Commonwealth of
         Massachusetts without regard to principles of conflicts of laws.

14.      Notice.
         ------

         For purposes of this Agreement, notices and all other communications
         provided for in the Agreement shall be in writing and shall be deemed
         to have been duly given when delivered by hand, telecopied (receipt
         acknowledged) or mailed by United States registered mail, return
         receipt requested, postage prepaid, addressed to the respective
         addresses set forth on the first page of this Agreement, provided that
         all notices to Company shall be directed to the attention of the
         Chairman with a copy to the Secretary of Company, or to such other
         address as either party may have furnished to the other in writing in

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         accordance herewith, except that notices of change of address shall be
         effective only upon receipt.

15.      Validity,
         ---------

         The invalidity or unenforceability of any provision of this Agreement
         shall not affect the validity or enforceability of any other provision
         of this Agreement, which shall remain in full force and effect. No
         waiver by either party hereto at any time of any breach by the other
         party hereto of, or compliance with, any condition or provision of this
         Agreement to be performed by such other party shall be deemed a waiver
         of similar or dissimilar provisions or conditions at the time or at any
         prior or subsequent time. The provisions of paragraph 6 shall survive
         the termination or expiration of this Agreement regardless of the
         reasons therefor. This Agreement may be executed in one or more
         counterparts, each of which shall be deemed to be an original but all
         of which together will constitute one and the same instrument.

         IN WITNESS WHEREOF, this Agreement has been executed as a sealed
instrument by the Company, by its duly authorized representative, and by the
Employee, as of the date first above written.


                                        GROUND ROUND RESTAURANTS, INC.



                                        By:
                                            ------------------------------------
                                             Daniel R. Scoggin
                                             Chairman, President and
                                             Chief Executive Officer




                                        STEPHEN J. KIEL



                                        ----------------------------------------



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